At this point, Dice-K is going to have to be part of the discussion about what to do with him. His contracts limits options and his star-status and salary limit the Sox's options about "disrespecting" him too blatently. At the same time, he has to understand that he isn't helping the team. I don't know him personally (obviously) and know very little about his personality. I'm sure he has an ego, as he should, but I haven't heard that he's not a team guy.
Here's the options I could see for him:
Dice chooses to take time off and just sit it out (my fourth option)
Dice chooses to go to the minor leagues and work on his stuff (my prefered option)
Dice demands a trade
Sox search for injury problems, evaluate, then rehab stint (my second prefered option)
Sox move him to the bullpen
Sox demand that he go to AAA, sit him if he refuses (use up roster spot)
Sox have him skip a start or two, keep him on the MLB club and have him throw simulated games with coaches. (my third prefered option)
Sox continue losing every 5th day
Long story short, he's done for the time being in my book. He's had his chances, but he is just throwing s***** and this team is too good and has too many good pitchers knocking on the door to let him suck like this.
He has the choice: either make this easy for the club, or be a bitch. I'm hopeful that he will step up like a professional and make this easy. Work out your issues at AAA, take Smoltz's spot and come back (hopefully) for the second half and the playoffs.